90% Of Indian Startups Will Fail Because Of Lack Of Innovation

Of late, India might have become the third-largest startup ecosystem, but it lacks successful innovation.

Notwithstanding the fact that market valuation of Indian startups has grown significantly over the past four years, a recent study, “Entrepreneurial India,” by the IBM Institute for Business Value and Oxford Economics found that 90% of Indian startups fail within the first five years. And the most common reason for failure is lack of innovation — 77% of venture capitalists surveyed believe that Indian startups lack new technologies or unique business models.

Other reasons cited for failure include lack of skilled workforce and funding, inadequate formal mentoring and poor business ethics, according to the study.

It’s well known that most Indian startups are prone to emulate successful global ideas, by and large fine-tuning an existing model to serve local needs. There’s Ola for Uber, Gaana for Spotify, OYO Rooms for Airbnb and Flipkart for Amazon.

India doesn’t have meta-level startups such as Google, Facebook or Twitter. On the other hand, China, with which India often compares itself, built its own Google named Baidu and Alibaba displaced Amazon. Unsurprisingly, in 2016, Asian Paints was the only Indian organization in Forbes’ 25 most innovative companies, and Gillette India was among Forbes Top 25 Innovative Growth companies.

“Since 2015, as many as 1,503 startups have closed down in India. And the major reason is due to the replication of Western business models, and not lack of subsequent funding from the investors,” says Rishabh Lawania, founder of Xeler8, a market intelligence platform recently acquired by a Chinese venture capital firm. The highest number of failures were in logistics, e-commerce and food technology.